Certified Supply Chain Professional (CSCP) Practice Exam

What is the cash-to-cash cycle time?

1. The duration between purchase and inventory turnover

2. The time from investment in raw materials to return

3. The period from sales completion to cash collection

4. The total time taken to manufacture a product

The correct answer is: The time from investment in raw materials to return

The cash-to-cash cycle time measures the total duration from the initial investment in raw materials to the actual return on that investment through sales. This metric encompasses the time it takes to convert inventory into sales and ultimately receive cash from customers. Calculating the cash-to-cash cycle time includes all stages of production and sales: 1. The time taken to purchase and pay for raw materials. 2. The period these materials are held in inventory before being turned into finished goods. 3. The time it takes to sell those finished goods. 4. Finally, the time until cash is collected from the sale. This comprehensive view reflects the efficiency of a company's operations in turning investments into cash flow, capturing the entire cycle of cash movement in relation to inventory and sales. Understanding this cycle is critical for improving working capital management and overall financial performance. The other options, while related to aspects of supply chain finance and inventory management, do not capture the full scope or intent of the cash-to-cash cycle time. For instance, focusing solely on the duration between purchase and inventory turnover overlooks sales and collection times, which are crucial components of the overall cash cycle.